Buy to Let – Hammered, But Still In Rather Good Shape

Now the dust has settled on another Autumn statement, the eMoov CEO has had time to pick at the bones of Osborne’s B2L back stab and, assess if it really is the grave injustice that we all agreed with our initial reactions.

It’s fair to say that for those impacted, George has kicked you whilst you’re down. First, the rug-pull of relinquishing higher rate tax relief on your buy to let mortgage in the Budget. Secondly, in yesterday’s Autumn Statement, with a ‘landlord tax’ which adds 3% to the purchase price of any residential property, used as a buy-to-let investment (or a second home for that matter).

It’s all very China.

The cosy existence of the property investor, both amateur and sophisticated, has been dealt a sucker punch. And it is a bit odd for a Conservative led Government to administer such a ferocious levy on middle England, given their aspirational ideology and so on. Daily Mail readers everywhere will be spitting out their Kenco this morning and Kenco isn’t as cheap as it use to be.

Those of us in the estate agency industry are similarly miffed, more so those in the rental sector of course. Anything that stifles buyer demand or supply of rental properties is bad for them (like higher interest rates; stamp duty increases above £1.5m; MMR; the weather). The outcries from the property trade forums are already deafening with regular contributors to Property Industry Eye and EAT, forecasting even more pronounced shortages of rental stock , a sort of ‘garden flat Armageddon’, if you will. Some are even threatening to angrily return their Lamborghini’s to their Park Lane places of purchase. Quite angrily. It’s that serious.

Which kind of brings me to my point and one that you’ll find unusual for someone whose best interests lie in promoting demand and lobbying for fewer obstacles in the home buying process.

The fact is that despite the bleating on the pages of Landlord Today (‘inevitable, significant rent increases…’ bla dee bla), buy to let landlords have had it great. In fact they’ve had it really great actually.

In the last ten years property values have climbed upwards and depending upon where you are in the UK, generally by a considerable amount (UK 21%; London 64%, according to the Halifax). Rents have also increased with Homelet, the UK’s largest tenancy reference provider, stating that they have risen by 4.9% in 2013; 7.7% in 2014 and a further 9.7% this year. Add in tax relief on mortgage interest payments at the higher rate, as was previously enjoyed by those qualifying, and you’ll see that buy to let has pretty much represented investor utopia for a while. No wonder there are now over 1 million such investors in the UK, double that of 1996 when landlord related mortgage products were first launched. Estimates are that total buy to let lending is around £1 trillion pounds.

Think about this too…. If you were to purchase a £100,000 house with a 20% LTV mortgage and saw it increase in value by just 2% per annum, after 10 years, your actual cash investment would have returned you an additional £22,000. That’s before you including any profit on your rental vs mortgage (albeit less void periods, costs etc). Notwithstanding, that’s a 110% increase on capital.

I tweeted this morning that George’s assault on UK landlords would result in less rental inventory, higher rents and also, less availability of social housing stock given that many privately owned rentals are let to those supported by public funds.

My initial anger and frustration with yesterday’s pillaging of the property investment sector, has frankly dissipated to a realisation that, all things considered, the 1m of you that own and rent properties are still doing pretty damn well. All George has done is to simply take a morsel of your good fortune for himself.

Whether it be the poor old estate agent or the hard trodden B2L tycoon, I suspect there will be little sympathy for your woes.